<span class="" id="parent-fieldname-description"> BHP Billiton plans to increase capacity at its Western Australian Iron Ore business by 65mtpa, while cutting costs 25%. But fresh rail development, BHP iron ore president Jimmy Wilson explained, is not part of the plan. </span> <p>Rather than expanding into new mining or infrastructure operations, BHP will focus on improving the efficiency of its existing operations to increase capacity to 290mtpa by 2016/17, up 65mtpa from current nameplate capacity of 225mtpa.<br /><br />BHP’s main railway in the Pilbara, however, doesn’t need any work to cope with increased capacity.<br /><br />“Our dual track rail infrastructure is capable of supporting the uplift in mine capacity,” Wilson said in a presentation to analysts and investors in the Pilbara this week.<br /><br />Production is set to increase via the completion of BHP’s phase one expansion at its Jimblebar mine, an increase in volumes at Mining Area C, and an increase in volumes at its Newman mining hub.<br /><br />Once these mine productivity increases are made, the company said, “the bottleneck shifts to the port”.<br /><br />“Inner Harbour Debottlenecking and Jimblebar Phase 2 projects will help us to reach 290mtpa of supply chain capacity at low capital cost,” Wilson said.<br /><br />Specifically, BHP predicts low-capital intensity upgrades of critical inflow and outflow routes at Nelson Point and Finucane Island, as well as the replacement of Reclaimer 6, and the expansion of Lump Rescreening Plant 2, at the company’s Port Hedland Inner Harbour operation, will unlock around 20 million tonnes of annual, incremental port capacity.<br /><br />One important aspect of the outlined capacity increase, Wilson explained, is that BHP thinks it can achieve it at a cost of just US$30 per added tonne. But the even more important point? The operating cost Wilson is targeting.<br /><br />“We expect unit cash costs of less than US$20 per tonne in the medium term,” a confident Wilson told the media.<br /><br />“Our reserves are concentrated around our four major mining hubs which will support a lower level of sustaining capital expenditure than required by our peers.”<br /><br />Rio, BHP’s major competitor in the iron ore game, is planning key greenfield expansions to grow its WA iron ore capacity. This, Wilson rather directly suggested, will cost more than BHP’s efficiency plans.<br /><br />“High [iron ore] prices over the last decade created the incentives needed for new entrants to join the market and traditional producers to substantially increase supply,” he said. “As a result, growth in seaborne supply is expected to exceed growth in demand over the short to medium term.<br /><br />“In anticipation of this transition, we turned our focus from major supply chain investment to productivity, cost reduction and capital efficient growth more than two years ago.”<br /><br />While Wilson did recognise that the supply growth of seaborne iron ore will outstrip demand growth in coming years, he said BHP’s own expansion plans were a no-brainer.<br /><br />“The economics of further increasing our production are compelling,” he said.<br /><br />“We completed our major supply chain investments some time ago and have since focused on using BHP Billiton’s benchmarking systems to improve the performance of our equipment by systematically tackling the bottlenecks.”</p>
